Future Fund to be quarantined: report

Treasurer Scott Morrison will reportedly announce in the budget that the $A130 billion Future Fund will be quarantined for up to a decade to prevent a premature raid on its coffers.

He will delay drawing down on the fund until at least 2026 to avoid a spiralling bill for future generations in covering the cost of public servants' defined-benefit superannuation payouts, The Weekend Australian reports.

The move aims to ensure the government can cover the full cost of the unfunded liabilities but will force it to use further borrowings over the medium term to partly pay for what will increase to an $8 billion-a-year cost to the taxpayer.

The Treasurer told The Weekend Australian the Future Fund did not yet have enough resources to cover the full cost of the public-sector superannuation payouts, and that starting to draw it down from the legislated date of July 1, 2020, would drain the fund.

He said it made no sense to draw down the fund's assets, which have been earning 7 per cent a year, when the government could borrow for no more than 2.8 per cent.

"I'm doing this to respect future taxpayers," Mr Morrison said ahead of handing down his second budget on Tuesday.

The decision has received the backing of former treasurer Peter Costello, now chairman of the Future Fund.